Traceability: Costs, Benefits, and the Future

The IFT has conducted many studies of traceability over the last six years, including a few related to the “cost” of traceability, and the value of the benefits. Since the practices within companies vary so widely, it becomes impossible to generalize costs and benefits. However, as companies were evaluated, it was clear that good recordkeeping—which is the foundation for traceability—is good for business.

Knowing which products are where allows for much better inventory control and stock rotation, decreasing the likelihood of economic losses due to products being out of date. Being able to identify and track products with granularity also is reported to improve the accuracy of filling orders, which makes customers happy and decreases the inefficiencies of dealing with complaints, refilling orders, etc.

For manufacturers, a system that requires products be scanned into production can prevent errors in formulation, including adding incorrect ingredients (like salt instead of sugar—yes, this has actually happened) or different grade/quality ingredients (e.g., using an organic ingredient in a non-organic product or vice versa). In a well-integrated and well-analyzed system, it should also be possible to link finished product quality data with specific ingredient suppliers.

Each of the “benefits” associated with better recordkeeping and traceability could be obtained in other ways and some firms have already reaped these benefits while having lackluster traceability systems. But for those firms that are in the process of examining systems to enhance other aspects of their business, they will be well served to see if there are some traceability add-ons that can be tacked onto a planned upgrade, for example in an enterprise resource planning or warehouse management system.

But what will it cost, and what is the ROI? IFT has developed a financial calculator to help companies understand the ROI of traceability. Although the calculator is specific for the seafood industry, a review of the main elements of the calculations suggest that it can have broad utility in doing the math to determine if traceability makes economic sense for a particular firm. The tool considers factors like new market opportunities, changes in insurance rates, the cost of recalls and any anticipated reduction due to better recordkeeping, and the cost of shrink/waste, as well as other factors. The tool also looks at the anticipated costs to achieve a desired level of traceability, whether that is moving from a paper-based system to a basic electronic system, or going beyond that to a more integrated electronic system.

In summary, as the Cyclospora outbreak demonstrates, traceability is still a challenge. And as the proposed FSIS rule illustrates, the government will take action to improve traceability if company practices are inadequate or inconsistent. Traceability is really a byproduct of good recordkeeping, and good recordkeeping can be used to realize other benefits. That said, we all recognize that there are costs, and the IFT tool can provide a start in gauging these costs and benefits.

Dr. McEntire is the vice president and chief science officer for The Acheson Group. Reach her at [email protected].